Reward Threshold: How Many Points a Reward Should Cost

By Alva Chew · Updated 2026-11-06

Definition A reward threshold is the number of points a customer needs before they can redeem a reward, such as 100 points for US$5 off. Set it so a regular reaches the first reward in two to four weeks. Research on a café coffee card found customers bought faster as they neared the goal, so a threshold that is close enough to see does real work.

What is a reward threshold?

A reward threshold is the points balance a customer must reach before they can redeem a reward. If a free coffee costs 100 points, the threshold is 100 points.

It sits next to the earn rate in every points-based loyalty program. The earn rate says how fast points arrive. The threshold says how many are needed. Together they fix how long a customer waits and how much you give back.

How does the threshold change what a customer gets back?

Divide the reward’s value by the threshold to get the point value. Multiply that by the earn rate to get the return on spend.

Earn rate	Threshold	Reward	Back on spend	Spend to reach it
1 point per US$1	100 points	US$5 off	5%	US$100
1 point per US$1	50 points	US$5 off	10%	US$50
1 point per US$1	200 points	US$5 off	2.5%	US$200
2 points per US$1	100 points	US$5 off	10%	US$50

Source: our own arithmetic, with illustrative numbers.

Halving the threshold doubles what customers get back, so choose the two numbers together.

What does research say about nearing a reward?

Customers speed up as a goal gets closer. Kivetz, Urminsky and Zheng ran a field study at a Columbia University café, where members collected stamps toward a free coffee. Their paper in the Journal of Marketing Research (2006) lists the figures below.

Finding	Figure
Fall in the time between purchases from first to last stamp	20% (0.7 days)
Days to make 10 purchases, plain 10-stamp card	15.6 days
Days to make 10 purchases, 12-stamp card with 2 bonus stamps already filled	12.7 days

Source: Kivetz, Urminsky and Zheng, Journal of Marketing Research, 2006. Single café, stamp cards.

The study used stamps, not points. The same logic suggests a customer who sees the gap closing buys sooner.

What happens when the threshold feels out of reach?

Rewards that never get redeemed do little for the customer or for you. Stourm, Bradlow and Fader studied a retailer whose linear programme earned 1% of spend.

Finding	Figure
Purchases that included a redemption	3%
Customers who never redeemed in 43 months	60%
Customers who redeemed at least once	40%

Source: Stourm, Bradlow and Fader, Journal of Marketing Research, 2015. One Latin American home and hardware retailer.

The authors attribute the hoarding mostly to cognitive and psychological motives, not to the cost of redeeming. A clear threshold, stated in dollars as well as points, makes the reward easier to picture. Points that are earned but never spent become breakage, and a redemption rate near zero tells you the threshold or the reward needs a look.

How do you set a reward threshold?

Pick the return. Most small businesses give back about 5% to 10% of spend. That sets the reward value per point.
Find a regular’s monthly spend. Divide it by the earn rate to get their points a month.
Aim for two to four weeks. Choose a threshold that a regular reaches in that time. A longer wait risks being forgotten.
Round to clean numbers. “100 points for US$5” is easy to say at the counter and easy to read in a wallet.

A worked example

A café gives 1 point per US$1 and a US$5 reward at 100 points.

Customer	Spend a month	Points a month	Time to threshold
Daily regular	US$120	120	About 3.5 weeks
Weekly visitor	US$40	40	About 10 weeks

Source: our own arithmetic, with illustrative numbers.

The daily regular fits the target. The weekly visitor waits too long. A sign-up bonus of 25 or 50 points moves that customer’s first reward closer without changing the threshold for everyone.

Mistakes to avoid

Setting it high to protect margin. A high threshold lowers cost only if customers still reach it.
Raising it quietly. Announce any rise ahead and leave existing balances alone.

How Gimify handles the threshold

In Gimify, points follow the purchase amount that staff enter at the counter, and the balance is one number across every outlet. The card lives in Google Wallet with a live balance, so customers can see how far they are from a reward.

Questions owners ask

What is a reward threshold in a loyalty program?

It is the minimum points balance a customer must reach to redeem a reward. If a free drink costs 100 points, the reward threshold is 100 points.

How high should a reward threshold be?

High enough that the reward returns a share of spend you can afford, low enough that a regular reaches it in about two to four weeks. Work it out from your earn rate and the reward's value.

Should I have one reward threshold or several?

One is simplest to explain and to run at the counter. A second, lower reward can help occasional visitors, but each extra level is another number customers must learn.

What happens if the threshold is too high?

Customers lose sight of the reward and many never redeem. In one retailer's data studied by Stourm, Bradlow and Fader, 60% of customers never redeemed over 43 months.

Can I lower the threshold later?

Yes. Lowering it gives customers something they like and costs you more per point. Raising it upsets regulars, so announce any rise early and never touch balances already earned.